REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.    396         OF 2009 (Arising out of SLP(C ) No. 19513 of 2006)

National Insurance Company Ltd.  ……Appellant

Versus

Meena Aggarwal ……Respondent

J U D G M E N T

Dr. ARIJIT PASAYAT, J.

1. Leave granted.

2. Challenge  in  this  appeal  is  to  the  order  passed  by  the  National

Consumer  Disputes  Redressal  Commission,  New  Delhi,  (in  short  the

‘National Commission’).

3. Background facts in a nutshell are as follows:

Respondent was the owner of a vehicle- a Maruti van which was the

subject  matter  of  insurance  with  the  present  appellant  for  a  period  from

27.1.2003 to 26.1.2004. The Vehicle in question met with an accident on

12.6.2003 and was badly damaged. The estimate of the cost of repair was

prepared by Automobiles Satya of Bilaspur. According to him the estimated

expenditure on total repair of the vehicle was Rs.2,00,000/-.  Intimation of

the same was given by the complainant to the present appellant and claim

was  made.  The  same was  rejected  on  the  ground  that  the  driver  of  the

vehicle did not possess a valid driving licence and the vehicle which was a

private vehicle was insured for personal use, but was being used as a taxi for

carrying  marriage  parties.  a  marriage  party  was  being  transported  in  the

vehicle after  charging rent  of Rs.2100/- when the accident  occurred. The

driver did not possess a valid licence and, therefore, the vehicle was being

plied  against  the  terms of  the  insurance  policy.   The  District  Consumer

Disputes  Redressal  Forum Sarguja,  Ambikapur  Chhattisgarh,  rejected  the

claim petition.  An appeal was preferred before the State Consumer Dispute

Redressal Commission, Rajpur (in short the ‘State Commission’). By order

dated 17.10.2005,  the appeal  was allowed.  It  was held that  it  would be

proper to declare the claim of complainant as “Non-standard” consequent to

the violation and breach.  Therefore, the present appellant was directed to

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pay Rs.90,000/- i.e. 75% of Rs.1,20,000/- i.e. the amount assessed by the

surveyor of the insurance company along with 9% interest.  The only reason

given by the State Commission was that even if the vehicle was being used

as a taxi, there was no fundamental breach of the terms of the policy.  A

revision petition was filed before the National Commission which came to

be dismissed by the impugned order.  The National Commission held that

even though the vehicle was being used as a commercial vehicle and the

driver did not have a valid driving licence, there was no fundamental breach

of the terms of the policy.

According to the appellant the insured vehicle was being used as a

commercial  vehicle,  and the  driver  of  the  vehicle  is  required  to  hold  an

appropriate licence. If the driver who was driving the vehicle at a relevant

point  of  time did not  possess  any licence to  drive a commercial  vehicle,

there is a breach of the conditions of the policy and such plea was available

to be raised as a defence.

4. This Court in National Insurance Co. Ltd. v. Swaran Singh [2004(3)

SCC 297] clearly laid down that the liability of the Insurance Company vis-

à-vis the owner would depend upon several factors. The owner would be

liable  for  payment  of  compensation  in  a  case  where  the  driver  was  not

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having a licence at all. It was the obligation on the part of the owner to take

adequate care to see that the driver had an appropriate licence to drive the

vehicle.  The  question  as  regards  the  liability  of  the  owner  vis-à-vis  the

driver  being  not  possessed  of  a  valid  licence  was  considered in  Swaran

Singh’s case  stating:  

“89. Section 3 of the Act casts an obligation on a driver to hold an effective driving licence for the type of vehicle which he intends to drive. Section 10 of the Act enables the  Central  Government  to  prescribe  forms  of  driving licences  for  various  categories  of  vehicles  mentioned  in sub-section (2) of the said  section. The various types of vehicles described for which a driver may obtain a licence for one or more of them are: (a) motorcycle without gear, (b)  motorcycle  with  gear,  (c)  invalid  carriage,  (d)  light motor vehicle, (e) transport vehicle, (f) road roller, and (g) motor  vehicle  of  other  specified  description.  The definition clause in Section 2 of the Act defines various categories  of  vehicles  which  are covered in  broad types mentioned  in  sub-section  (2)  of  Section  10.  They  are ‘goods carriage’, ‘heavy goods vehicle’, ‘heavy passenger motor  vehicle’,  ‘invalid  carriage’,  ‘light  motor  vehicle’, ‘maxi-cab’, ‘medium goods vehicle’,  ‘medium passenger motor  vehicle’,  ‘motor-cab’,  ‘motorcycle’,  ‘omnibus’, ‘private  service  vehicle’,  ‘semi-trailer’,  ‘tourist  vehicle’, ‘tractor’,  ‘trailer’  and  ‘transport  vehicle’.  In  claims  for compensation  for  accidents,  various  kinds  of  breaches with regard to the conditions of driving licences arise for consideration before the Tribunal as a person possessing a driving licence for ‘motorcycle without gear’, [sic may be driving a vehicle] for which he has no licence. Cases may also  arise  where  a  holder  of  driving  licence  for  ‘light motor vehicle’ is found to be driving a ‘maxi-cab’, ‘motor- cab’ or  ‘omnibus’ for  which  he has  no licence.  In  each case, on evidence led before the Tribunal, a decision has to

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be taken whether the fact of the driver possessing licence for one type of vehicle but found driving another type of vehicle, was the main or contributory cause of accident. If on facts,  it  is  found that  the accident  was caused solely because of  some other  unforeseen or  intervening  causes like mechanical  failures and similar  other  causes having no nexus with the driver not possessing requisite type of licence, the insurer will not be allowed to avoid its liability merely  for  technical  breach  of  conditions  concerning driving licence.”

5. The  matter  came  up  for  consideration  again  before  this  Court  in

National Insurance Corpn. Ltd. v. Kanti Devi [2005 (5) )SCC 789] wherein

this Court upon consideration of the observations made in Swaran Singh’s

case opined:  

“12.  The  decision  in  Swaran  Singh  case  was  not before  either  MACT  or  the  High  Court  when  the respective  orders  were  passed.  Therefore,  we  think  it proper  to  remit  the  matter  to  MACT  for  fresh consideration.  It  shall  permit  the  parties  to  lead  such further evidence as they may intend to lead. The matter shall be decided keeping in view the principle enunciated by this Court in Swaran Singh case.”

6. In  a  case  of  this  nature,  therefore,  the  owner  of  a  vehicle  cannot

contend that he has no liability to verify the fact as to whether the driver of

the vehicle possessed a valid licence or not.

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7. The aforesaid aspect was thereafter highlighted in National Insurance

Co. Ltd. v.  Kusum Rai [2006(4) SCC 250].  The said case related to the

liability in the case of a third party. In the instant case, no such claim is

involved and the claim is related to the damage of a vehicle.

8. The respondent has not appeared in spite of service of notice.

9. We find  that  the  State  Commission  and  the  National  Commission

have not practically indicated any reason for coming to the conclusion that

there was no fundamental breach of the terms of the policy.  Both the State

Commission and the National  Commission observed that  the vehicle was

being  driven  by a  person  who did  not  have  a  valid  driving  licence.   In

addition to that the vehicle which was insured for personal use was used for

commercial purposes.  

10. Looked  at  from  any  angle  the  impugned  orders  of  the  State

Commission and the National Commission are unsustainable, deserve to be

set aside, which we direct. No costs.

………...................................J. (Dr. ARIJIT PASAYAT)

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……........................................J. (ASOK KUMAR GANGULY)

New Delhi, January 23, 2009         

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